What is a Debt Settlement?

If you are struggling to repay your debts and cannot make voluntary repayment agreements with your creditors, you can apply for a public debt settlement. You
apply through the Enforcement Officer.

A debt settlement is an agreement between you and your creditors. The agreement can either be voluntary or compulsory. A compulsory agreement means that the court has decided you qualify for a debt settlement.

The goal of a debt settlement is to help you regain control of your finances.

The Enforcement Officer will create a budget for you to follow during the settlement period. The budget will allocate funds for reasonable housing expenses and living costs for you and your household. The living cost rates are determined by the Regulations on Living Allowance Rates. If your income exceeds your expenses, the surplus is paid to your creditors.

It will be noted in the Movable Property Register that you have a public debt settlement. This will function similarly to a standard payment remark.

A debt settlement usually lasts 5 years. As a general rule, you cannot receive another debt settlement once it is completed.

Your obligations are detailed in the agreement with your creditors and in the Debt Settlement Act.

The Enforcement Officer will review the proposed agreement with you and explain what you need to follow during the settlement period.

What to Keep in Mind During a Debt Settlement:

• Have a financial surplus? You are responsible for paying this surplus to yourcreditors.
• Receive a surplus from inheritance or winnings? Pay the surplus to yourcreditors.
• Change in finances? Inform your creditors if your financial situation changes.
• Follow the budget. If unexpected expenses arise, contact the EnforcementOfficer, who can help propose changes to the debt settlement if justified.
• Provide annual updates. The agreement typically requires you to send specificinformation to creditors each year, such as a copy of your tax settlement, sothey can monitor your payments.

The Debt Settlement Act is primarily for private individuals. If you operate a business, you can only qualify for a debt settlement if the business-related debt constitutes a minor part (around 10%) of your total debt.

You cannot initiate debt negotiations if you are undergoing bankruptcy proceedings. A debt settlement case will be closed if bankruptcy is initiated. However, if you already have a debt settlement, it will not be revoked even if bankruptcy proceedings are started later.

If someone is a guarantor or co-debtor for a claim, they remain liable for theremainder of the debt after you complete your debt settlement.

• Guarantors or co-debtors cannot demand repayment from you afterward.
• Guarantors or co-debtors must be notified when debt negotiations begin andreceive the debt settlement proposal.

Creditors must write off the claims once you have fulfilled the agreement and completed the debt settlement.